National overhauls of banking and market rules in response to the financial crisis have set back plans by world leaders to create common standards, regulators and industry officials say.

The US, European Union and Japan have imposed new rules on banks and investors in response to the turmoil, in some cases undoing years of work to build up global standards, officials said at a conference of the International Organization of Securities Commissions (IOSCO) in Tel Aviv this week.

"It will be difficult once the crisis is over to start again with a coherent system of international cooperation," said Eddy Wymeersch, chairman of the EU's Committee of European Securities Regulators and supervisory board chairman of the Belgian Banking, Finance and Insurance Commission, in an interview in Tel Aviv.

The single-country responses delay not only initiatives to develop uniform rules pledged by world leaders at the Group of 20 summit in London on April 2. They also complicate efforts by regulators to guard against financial disruptions such as the US subprime-mortgage collapse that triggered the credit crunch.

Also at stake is the ability to build consistent rules desired by the global financial industry.

"We desperately would like to see convergence of rules around the world," Goldman Sachs Group Inc. Chief Executive Officer Lloyd Blankfein said at the conference Wednesday.

'Divergent approaches'

The differences include divergent approaches between the US and EU ââ‚¬" the world's two largest economic blocs ââ‚¬" to regulating bank capital, hedge funds and credit-rating companies such as Moody's Investors Service and Standard & Poor's, regulators and industry executives say. Japan, the US and Europe have also imposed varying restrictions on short-selling.

"Everyone knows that we have to cooperate as closely as possible, because of contagion," said Hans Hoogervorst, head of Dutch financial regulator AFM and vice chairman of IOSCO's main standard-setting body, the Technical Committee. "This is a more serious problem than the H1N1 flu that came from Mexico," he said in an interview at the conference.

'Financial crisis'

The financial crisis, which started with the collapse of the US property market in 2007, has triggered more than US$1.46 trillion of writedowns and credit losses at banks and other financial institutions and sent the global economy into its first recession since World War II, according to data compiled by Bloomberg.

The turmoil that arose two years ago has slowed a drive between 2005 and 2007, when many countries adopted Basel II global banking standards and international accounting standards took hold in more than 100 countries. US regulators meanwhile were moving toward applying the global rules.

"We have lost a little bit of momentum and we will have to start it over again," Wymeersch said. As a result, he said, business "is going to be more costly. If you want to do capital raising it will be more costly. If you want to establish banks, you have duplication of supervision, and so on."

Since the credit crunch, the EU has proposed bank-capital revisions ahead of the Basel, Switzerland, committee that writes banking rules. US policy makers also have forced through changes to accounting rules, that some say are out of sync with a review by the international standard-setters.

"Progress in global convergence in regulatory standards has ground to a halt," Richard Britton, a consultant on regulatory issues to the International Capital Market Association, said in an interview in Tel Aviv. "The hope must be that, as the world economy recovers from the crisis," the momentum from 2005-2007 "will be regained."

To get back on track, the G-20 has called on the Financial Stability Board of central bankers and finance ministers to coordinate efforts to stiffen regulations for banks, hedge funds, and other parties.

"Whatever we do, no matter how we design future regulation, we will continue having a level playing field," Mario Draghi, FSB chairman and governor of the Bank of Italy, said at the conference Wednesday. "That's the most important thing and it's the thing that's most in danger right now."